From 1 January 2025, intentionally underpaying workers became a criminal offence under Australian federal law. The changes, introduced by the Fair Work Legislation Amendment (Closing Loopholes) Act 2023 (Cth), represent one of the most significant shifts in employment law in years. If you employ people in Australia, you need to understand what this means for your business. For background on employee rights, see our guide to unfair dismissal in Victoria.
What Is Wage Theft?
Wage theft, in the legal sense, refers to the deliberate underpayment of wages, superannuation, allowances, or other entitlements owed to an employee. Under the new criminal laws, it is the intent to underpay that triggers criminal liability, not simply getting the numbers wrong.
Honest mistakes and genuine payroll errors are not criminal offences. The law targets employers who knowingly pay workers less than their entitlements.
What Are the Penalties?
The penalties for criminal wage theft are serious.
For Individuals
An individual, such as a business owner or payroll manager, found guilty of intentional wage theft can face up to 10 years’ imprisonment and a fine. The fine can be up to 5,000 penalty units (currently $1.82 million) or three times the underpayment, whichever is greater.
For Corporations
A corporation found guilty of wage theft can face a fine of up to 25,000 penalty units (currently $9.1 million) or three times the underpayment, whichever is greater.
These are among the most severe employment law penalties in Australian history. They reflect the seriousness with which Parliament is treating deliberate underpayment.
The Role of the Fair Work Ombudsman
The Fair Work Ombudsman (FWO) is responsible for investigating and enforcing compliance with workplace laws, including the new criminal wage theft provisions. If the Fair Work Ombudsman is satisfied that a small business employer complied with the Voluntary Small Business Wage Compliance Code in relation to an underpayment, it must not refer that underpayment for criminal prosecution (Fair Work Act 2009 (Cth) s 327B). The FWO has significantly increased its compliance and enforcement activity in recent years.
Importantly, the FWO has indicated that employers who voluntarily disclose underpayments and cooperate with investigations may receive more favourable treatment than those who do not come forward. If you have identified a potential underpayment issue in your business, early and transparent action is strongly advisable.
What Employers Should Do Now
Even if you are confident your payroll is correct, the new laws make this a good time to review your practices. Steps worth taking include:
- Conducting a payroll audit to check that you pay all employees correctly under their employment contracts and applicable Modern Awards
- Reviewing employment contracts to make sure they reflect current obligations
- Checking that you calculate and pay superannuation on time and in full
- Training payroll staff on award obligations and any recent changes
- Seeking legal advice promptly if you identify any underpayments, so you can understand your exposure and the best way to address the issue
Civil Claims Still Apply
The criminal wage theft laws operate alongside existing civil remedies. Employees can still bring civil underpayment claims in court, including through the small claims procedure for claims of $100,000 or less, or ask the Fair Work Ombudsman for help, whether or not a criminal investigation is under way. This means the financial and reputational consequences of underpayment can compound quickly.
Get Legal Advice
Perhaps you are an employer with concerns about your payroll practices, or you have received a complaint from an employee. Either way, getting legal advice early is the best thing you can do. Contact Professional Edge Lawyers to speak with an employment law solicitor. We can help you review your obligations, respond to a complaint, or work through the process of making a voluntary disclosure.
This article is general information only. It is not legal advice about your situation, so obtain advice on your own circumstances before acting.
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